Rs 18.63 billion Dividend tranche from GAIL to Central government
GAIL India Dividend 2024: The central government has received a dividend tranche of about Rs 18.63 bn from GAIL (India) Ltd, informed the secretary at the Department of Investment and Public Asset Management through its X handle on Monday, February 12. Incorporated in the year 1984, GAIL it is engaged in the business of oil refining and marketing. Dividend refers to a reward, cash or otherwise, that a company provides to its shareholders. Dividends can be issued in various forms, such as cash payment, stocks or any other form.
U.S. Oil Inventories Rise, Gasoline and Distillate Stocks See Strong Draws
Crude oil inventories in the United States rose by 8.52 million barrels for the week ending February 9, according to The American Petroleum Institute (API), after analysts predicted a build of 2.6 million barrels. The API reported a 674,000-barrel rise in crude inventories in the week prior. On Tuesday, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) rose by 0.8 million barrels as of February 9. Inventories are now at 358.8 million barrels. Oil prices were up ahead of the API data release on persistent tensions in Russia and the Middle East but capped by new data showing that inflation remained high in January, which could delay Fed rate cuts. At 4:01 pm ET, Brent crude was trading up 0.74% on the day at $82.61, up $4 per barrel from this time last week. The U.S. benchmark WTI was trading up on the day by 1.08% at $77.75, also up $4 per barrel compared to this time last week. Gasoline inventories saw a significant drawdown this week, falling by 7.23 million barrels, more than offsetting the 3.652 million barrels rise in the week prior. As of last week, gasoline inventories were about 1% below the five-year average for this time of year, according to the latest EIA data. Distillate inventories also fell this week, by 4.016 million barrels, on top of last week’s 3.699 million barrels drop in the week prior. Distillates were already 7% below the five-year average for the week ending February 2, the latest EIA data shows. Cushing inventories rose by 512,000 barrels after rising by 492,000 barrels in the previous week.
Red Sea Crisis Is Tightening Oil Markets
Disruptions to shipping in the Red Sea and via the Suez Canal are raising the prices of African and U.S. crude grades and expanding the backwardation in the global Brent crude benchmark, signaling tightening markets and a run-up in diesel prices in Europe. Europe, which has been left exposed to more crude and fuel supplies from the Middle East and Asia since the embargoes on Russian petroleum took effect early last year, now finds itself looking for deliveries from nearby exporters. Growing volumes of petroleum products are now bypassing the Suez Canal – the shortest route from Asia and the Middle East to Europe – and are heading on the longer route via the Cape of Good Hope in Africa, which delays planned deliveries and raises shipping costs. As a result, Europe is buying more U.S. and West African crude. Increased appetite for the so-called Atlantic barrels in Europe is driving the price of Nigerian and U.S. crude grades and is steepening the backwardation in Brent Crude futures, traders tell Bloomberg. Backwardation typically occurs at times of market deficit, and in it, prices for front-month contracts are higher than the ones further out in time. The deeper backwardation curve suggests the market is tightening, analysts say, noting that the supplies may be tighter than market sentiment and price action in oil imply. Analysts expect drawdowns in global stocks this month and next to support oil prices. But they are unsure how long the tightness could persist, as factors including spring refinery maintenance, concerns about demand, and the upcoming OPEC+ decision on extending the cuts – or not – could all upend the current market supply-demand balances. Higher Atlantic Basin Crude Prices As Europe is looking to purchase crude that would travel shorter and safer delivery routes, the prices of Egina and Forcados, key Nigerian grades, have risen in recent weeks. The two West African crudes are now being offered at higher premiums to Dated Brent compared to the premiums from a month ago, according to Bloomberg’s estimates. U.S. grade WTI Midland is also in high demand in Europe, and the crude price has increased compared to the North Sea benchmark in recent weeks. According to Bloomberg’s trading sources, French supermajor TotalEnergies has been bidding nearly every day for WTI Midland supply in a pricing window since the beginning of February. Diesel Tightness Diesel supply is also tight in Europe, partly due to the Red Sea shipping disruptions and lower European refining capacity with some refinery closures and refinery maintenance in the spring. The premium of diesel over crude has surged in recent days to the highest level for this time of year in more than a decade—since 2012. Due to the Red Sea disruption of flows to Europe and spring refinery maintenance, “We expect to see a fall in northwest Europe diesel/gasoil stocks over the next two months,” Wood Mackenzie analyst Emma Howsham told Bloomberg. Diesel prices in Europe started rallying last month amid tightening supply due to Red Sea shipping disruptions, threatening to test the resilience of European economies that have narrowly avoided recessions in recent months. “The European middle distillate market has been plagued by tightness since Russia’s invasion of Ukraine, which has resulted in drastic shifts in energy flows with the EU banning Russian crude oil and refined products. This has left Europe more dependent on Asia and the Middle East for flows, and these flows are being affected by the Houthi attacks in the Red Sea,” ING strategists Warren Patterson and Ewa Manthey wrote in a note on Tuesday. Middle distillates, including diesel, are likely to remain well supported in the short term as refineries go into maintenance season, they added. Tighter Crude Oil Market The prompt Brent time spread weakened on Monday, but the trend this year “has been for the spread to move into deeper backwardation, suggesting that the market is tightening,” ING’s strategists said. The oil market will see marginal tightening with a relatively small deficit this quarter, but this could flip into a surplus in the second quarter if OPEC+ fails to roll over part of its cuts beyond Q1, according to ING. Saxo Bank expects Brent and WTI to remain range-bound in the first quarter at around $80 and $75 a barrel, respectively. However, “disruption risks, OPEC+ production restraint, a tightening product market and incoming rate cuts potentially leaving the risk/reward skewed slightly to the upside,” Saxo Bank’s Head of Commodity Strategy, Ole Hansen, said at the end of last week. Distillate supplies have been disrupted by lower supply from Russia amid Ukrainian attacks on Russian refinery infrastructure and Houthi attacks on vessels in the Red Sea and the Gulf of Aden, Hansen noted. In crude markets, global supply is showing signs of tightness as total exports dropped in January compared to December by the largest amount since August 2023, while global onshore inventories continued to fall, according to Vortexa. Excluding Iran and Venezuela, total crude and condensate exports fell month-on-month by more than 700,000 barrels per day (bpd) in January, marking a steep decline after a brief uptick in December, Jay Maroo, Head of Market Intelligence & Analysis (MENA) at Vortexa, wrote in an analysis last week. Significant drawing of inventories is still taking place, suggesting that “wider macroeconomic concerns, and its impact on demand, is being outstripped by tighter prompt availability,” Maroo noted. “Looking ahead, given market expectations that OPEC+ production will remain constrained, the near-term outlook for crude prices could be more supportive than current sentiment suggests, even with strong signs of weakening global product demand.”
HFE pioneers green hydrogen exploration in India
Srivatsan Iyer, Global Chief Executive Officer of Hero Future Energies (HFE), the renewable energy division of the Hero Group, announced that the company is aggressively investigating prospects for green hydrogen projects in India. To explore several green hydrogen project options, the company is interacting with a range of customers throughout India. Announcements are expected in the upcoming months. HFE made it clear that it has no intention of making green hydrogen electrolysers. The company will continue to source electrolysers from the market, utilising the best available technology, even if it recently signed a strategic memorandum of understanding with Bangalore-based Ohmium, an electrolyser firm. Ahmium International and HFE are working together to build 1,000 MW of green hydrogen production plants in Europe, the UK, and India. With a further 2 GW of projects in the works, the business presently boasts a global portfolio of 3 GW of renewable energy assets. Srivatsan Iyer highlighted the necessity of demand mandates while expressing optimism on this year’s budget allocation for green hydrogen. In order to stimulate the industry, he recommended that the government take into account enacting levels of demand requirements. The high cost of green hydrogen relative to conventional sources is currently deterring large customers in sectors like fertilisers and refineries from adopting it. Reducing costs and hastening the adoption of green hydrogen could be achieved through more demand-driven adoption. Iyer suggested two options for providing green hydrogen to the general public. One is integrating it gradually into the city gas distribution system while safety regulations are being developed. The other is the use of green hydrogen for heavy-duty mobility, such as converting long-distance trucks or buses with internal combustion engines to run on hydrogen fuel.
GAIL, IGL walk away with Reliance gas; bid at USD 11 per million BTU
State-owned gas utility GAIL (India) Ltd and the nation’s largest city gas operator Indraprastha Gas Ltd have walked away with most of the coal seam gas that Reliance Industries Ltd auctioned, sources said. Reliance earlier this month conducted an e-auction for sale of 0.90 million standard cubic metres per day of gas it will produce from coal-bed methane (CBM) block SP (West)-CBM-2001/1 in Madhya Pradesh. Users have been asked to quote a premium they are willing to pay over and above 12.67 per cent of the dated Brent crude oil price, according to a tender floated by the company. The auction saw GAIL and IGL walk away with most of the gas, offering as much as USD 11 per million British thermal unit price, two sources with direct knowledge of the matter said. GAIL won 0.63 mmscmd of gas in the auction while IGL picked up 0.14 mmscmd, they said. In the auction, the gas price was set as higher of 12.67 per cent of dated Brent plus premium ‘V’; or the government-declared monthly price for conventional gas. The government-mandated price for January is USD 7.85 per mmBtu. While Reliance had set the starting bid price of ‘V’ at USD 0.50 per mmBtu, bidders quoted USD 0.78 to walk away with the coal bed gas, they said. At the current Brent crude oil price of USD 80 per barrel, the gas price comes to USD 11 per mmBtu (12.67 per cent of USD 80 is USD 10.1 per mmBtu. Added to this is the bid value of ‘V’ of USD 0.78, which takes the gas price to USD 10.9 per mmBtu). The e-auction happened on February 2. The gas supply in the contract is for 1 to 2 years beginning April 1. The pricing Reliance is seeking is modified from the March 2022 auction. In that auction, it had sought bids at a premium over the base of 13.2 per cent of Brent crude oil price. In March 2022, Reliance sold 0.65 mmscmd of CBM at a USD 8.28 per mmBtu premium over the prevailing Brent crude oil price. Brent oil was trading above USD 115 per barrel at that time. It has now slipped to USD 78 a barrel. Last month, state-owned Oil and Natural Gas Corporation (ONGC) sought a premium over the government-dictated gas price of USD 7.82 per mmBtu for the gas it plans to produce from a CBM block in Jharkhand. ONGC sought bids from users for the sale of 0.05 mmscmd of gas from the North Karanpura coal-bed methane (CBM) block in Jharkhand for three years. Users were asked to quote a premium they are willing to pay over and above the monthly domestic natural gas price that the oil ministry’s Petroleum Planning and Analysis Cell (PPAC) notifies, the tender document showed. PPAC every month declares a price for the majority of domestically produced natural gas. This price is 10 per cent of the monthly average of the basket of crude oil that India imports. For the month of February, this price comes to USD 7.85 per million British thermal units. This price in the ONGc tender was marked as a reserve gas price. While the government sets prices for two-thirds of the gas produced in the country, CBM gas enjoys pricing freedom where sellers are allowed to discover the market rate. Gas extracted from below ground is used to produce electricity, make fertilisers or turned into CNG for sale to automobiles and piped to household kitchens for cooking purposes.
BPCL plans an oil trading desk in Singapore, Dubai
Bharat Petroleum Corporation (BPCL) is planning to open a trading desk in Singapore or Dubai to expand its global reach, sourcing, and trade in crude oil as well as finished products, according to industry officials aware of the development. BPCL will set up the desk this year, sources added. The Singapore desk, sources said, would also help the company trade in energy derivatives and facilitate international financing. In the international oil market, products are bought and sold through trading desks. The desk is manned by a licensed trader and trades take place instantly. BPCL did not reply to an email sent. “BPCL is planning to set up a trading desk as being in the center of action and knowing the ecosystem, helps you clinch better commodity deals,” said an industry official aware of the talks. A trading desk helps companies procure crude oil from the international market on a real-time basis, helping cut import prices by locking in the best price and quality. Officials added that the Russia-Ukraine war disrupted the supply of crude oil in the market, forcing Indian refiners to look for crude sourcing options beyond the Middle East, which has been the major source of oil supplies to Indian refiners.”A trading desk will give BPCL the flexibility to enter and exit markets faster as operations are 24/7. This will enable faster turnaround on crude oil trading and ensure flexibility,” the official added. Last fiscal, BPCL procured 38.2 million metric tonnes per annum of crude for its three refineries in Mumbai, Bina (Madhya Pradesh), and Kochi. The refineries processed five new grades of crude oils which were procured for the first time by BPCL, according to the company’s FY2023 annual report. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85% of its requirements. India’s public sector refiners Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) source 70% of crude oil on term contracts and the rest on a spot basis. This helps companies diversify their crude supply basket and address market volatility. Term contracts are long-term oil purchase deals with fixed volumes and pricing and spot contracts are immediate purchases from suppliers.
India fuel demand surges, refiners’ margins to stay strong, mid-single-digit growth in India’s petroleum products: Fitch
India’s demand for petroleum products is expected to increase by a mid-single-digit percentage in the financial year ending March 2024, following a 10 per cent post-pandemic recovery in 2022-23, according to Fitch Ratings, as reported by ANI. Both petrol and diesel sales saw robust 4-6 per cent increases in the first nine months of 2023-24, driven by heightened economic activities in the agriculture and power sectors, as well as a surge in holiday travel and auto sales. Fitch anticipates that Indian refiners’ gross refining margins (GRM) will moderate during 2024-25 from the strong levels expected in 2023-24 but will remain above mid-cycle levels. By 2025-26, a shift closer to mid-cycle levels is foreseen, with resilience bolstered by the escalating demand for end-products. “The gradual normalisation of the crude supply mix away from Russian imports is likely to narrow GRMs, although we expect margins to stay strong, supported by the rising demand for end-products,” the rating agency said. In the upstream segment, domestic oil and gas production has modestly increased, driven by a 5 per cent rise in gas production in the first nine months of 2023-24. “We expect production to continue to rise moderately as technological investments in enhanced oil recovery techniques will offset natural declines,” the rating agency added. Fitch forecasts that the oil and gas sector’s high capex intensity will continue in the medium term, particularly with upstream companies investing in production enhancement.
India and Russia in talks over long-term oil deals – Bloomberg
State oil refiners in India are negotiating long-term agreements for supplies of crude with Russian energy giant Rosneft, Bloomberg reported this week, citing people with knowledge of the matter. According to the report, Indian Oil, Bharat Petroleum, and Hindustan Petroleum are taking part in the discussions, aiming to sign deals for a steady supply instead of one-off purchases, which is expected to make them less exposed to competition. The refiners reportedly want to secure deliveries of around 500,000 barrels per day of Russian oil in the contracts. They also plan to include clauses that would protect them from penalties in case of payment issues and delivery delays. Indian Oil already has a contract with Rosneft from 2020, under which the refiner was to import 2 million tons of Urals grade crude from the Russian company per year. The deal was extended in 2023, with the two companies agreeing to substantially increase oil deliveries and diversify oil grades shipped to India. The other two state refiners do not have existing long-term contracts with Rosneft. Neither company has so far responded to requests for comment. India, the world’s third-largest crude oil importer, has been ramping up imports of Russian oil over the past two years despite Ukraine-related sanctions on Moscow, taking advantage of discounts that Russia offered to secure new markets after losing buyers in the West. Last year, Russia exported an average of 1.75 million barrels of crude to India per day, according to Kepler data analyzed by The Independent, dominating the Indian market as the primary supplier. While there was a drop in India’s imports of Russian oil at the end of last year, reportedly due to payment issues linked with the sanctions, analysts say that Indian demand remains strong. Speaking to RT on the sidelines of India Energy Week on Thursday, Oil Minister Hardeep Singh Puri said that Russian oil currently accounts for 30%-34% of India’s total imports of oil, up from just 0.2% before the start of the Ukraine conflict in February 2022. He pledged that India will continue to buy Russian crude as long as the prices are favorable.
PSU Three more LNG terminals to be set up in Bangladesh
The government has a plan to establish three additional liquefied natural gas (LNG) terminals alongside the existing two for re-gasifying imported gas. Two of these will be situated in Moheshkhali and Matarbari in Cox’s Bazar, while the third will be at Payra, with two being floating and one land-based. The capacity of the existing Floating Storage and Regasification Units (FSRU) will be expanded from 500mmcft to 630mmcft per day. The total re-gasification capacity of the proposed LNG terminals is set to reach 2,000mmcft per day. The initial two FSRUs, one from Summit Group and the other from Excelerate Energy, are expected to commence operations in 2026 and 2028, respectively. For the floating terminals, Excelerate Energy will set up one in Payra, while Summit Group will establish another in Moheshkhali. The land-based terminal, with a production capacity of 1,000mmcft, will be situated in Matarbari. The FSRU in Cox’s Bazar is anticipated to supply a minimum of 600 million cubic feet per day (mmcfd) of gas, extendable to 800 mmcfd. This facility will be approximately five kilometers off Moheshkhali island in the deep seas of the Bay of Bengal. In June 2023, the Cabinet Committee on Economic Affairs provisionally approved a proposal to award Summit. Oil and Shipping Company Ltd the task of setting up the third floating LNG terminal in Moheshkhali, Cox’s Bazar, with a capacity of 600mmcft LNG per day. The LNG terminals are being established based on unsolicited offers from both local and foreign companies. Petrobangla has plans to further increase gas regasification capacity by setting up additional LNG terminals at Payra and Matarbari. Currently, there are two FSRUs (LNG terminals) in Bangladesh-one operated by Excelerate Energy in Moheshkhali and another by the Summit Group in the same area. With the operation of three new terminals and the expansion of existing ones, the country’s LNG production is projected to rise to 3,200mmcft per day.
Oil Markets Are Much Tighter Than Oil Prices Suggest
Oil prices have continued trading in a narrow range in the new year with fears about weak fundamentals and the threat of a recession outweighing geopolitical risks. Last week, Commodity analysts at Standard Chartered argued that oil fundamentals were in better shape than the market was giving it credit for, and the market is heavily discounting geopolitical risks. This week, Standard Chartered is back again, noting a sharp improvement in oil balances in the current year compared to 2022, suggesting the market is much tighter than current prices might imply. According to StanChart, the global oil surplus we are currently witnessing is due to seasonal weakness in the month of January; however, the surplus this time around is much smaller than the average over the past two decades. StanChart notes that there’s been a January inventory draw in only three years since 2004, with the first month of the year averaging a build of 1.2 million barrels per day (mb/d). January 2023 recorded a mega-surplus to the tune of 3.4 mb/d; the third largest surplus in any month over the past 20 years with only two months at the start of the pandemic posting bigger numbers. This year’s surplus appears to be significantly smaller than the average, with StanChart putting it at just 0.3 mb/d. Even better for the bulls, StanChart has predicted that this surplus is transitory and will flip into a 1.6 mb/d deficit in February. The Energy Information Administration (EIA) is even more bullish and has forecast a 2.3 mb/d deficit. The improvement in the global oil balance is reflected in U.S. weekly data. StanChart points out that the first five readings from its proprietary oil data bull-bear index in 2023 had two that were ultra-bearish while three were highly-bearish. In contrast, the first five readings of the current year have run neutral, mildly bullish, bullish, highly bullish and mildly bullish with the four-week average showing a strong upwards trend. The latest EIA release is mildly bullish, while StranChart’s bull-bear index has improved +22.4. The commodity experts have reported that U.S. crude output has fully recovered to 13.3 mb/d after the recent freeze-related fall; however, the analysts have predicted there’s little scope for further increases for the rest of the year. Standard Chartered says there will be very limited incremental growth in U.S. crude oil supply in 2024, with growth expected to sharply decelerate and even turn negative in December 2024 from above 1.2 million barrels per day (mb/d) in December 2023. The EIA is even more pessimistic on U.S. crude production, and has predicted U.S. supply growth will turn negative as early as September. JP Morgan: Crude oil to rise another $10 by May There’s more good news for the oil bulls. A growing number of analysts are saying oil prices have limited downside at this juncture and have forecast an oil price rally as the months roll on. According to J.P. Morgan, the oil market outlook “continues to project a tightening market with prices rising from here by another $10 by May.” The JPM forecast assumes that OPEC+ leaders will unwind 400K bbl/day of cuts from April and has assigned no risk premium from the Middle East turmoil. JPM says whereas OPEC’s implementation has been “ambiguous” in the first month of new cuts, crude shipments on a 30-day moving average basis are down 1.3M bbl/day from the October peak. Meanwhile, current data suggest an improving global economy, with observable crude inventories having steadily drawn down over the last month in pivotal markets in the U.S., Europe, Japan, China and Singapore. Meanwhile, data at the beginning of the current week showed larger than expected drawdowns in gasoline and distillate inventories, further supporting the bullish thesis.